Suara Import vs DBP

Gr. No. L-24968

Facts: Suara Import and Export Co., Inc., had already purchased a jute mill
machinery on the strength of a letter credit extended by the Prudential Bank, to
secure the release of machinery without first paying the draft, it executed a trust
receipt to the said bank. Subsequently, Suara Inc., applied to the Rehabilitation
Finance Corporation (RFC) for an industrial loan of P500,000.00, which is to be
used for the construction of a factory building, a payment to the balance of
purchased machinery and equipment to be installed, and for the working capital.
On the resolution no 145 of RFC approved Saura’s loan application, which
is to be secured by a first mortgage on the factory building to be constructed, the
land site thereof, and the machinery and equipment to be installed. This should be
signed jointly with the borrower corporation by Mr. & Mrs. Saura, Arellano,
Caolboy, Estabillo and China Engineers, Ltd. on a promissory notes. Furthermore,
RFC will only release its funds subject to its availability or by its discretion.
Negotiations between RFC and Saura Inc., came to a standstill, hence, the
Suara Inc., requested a cancellation of the mortgage contract. After 9 years, Suara
Inc., commenced a suit for damages, alleging the failure of RFC to comply with its
obligation to release the proceeds of the loan applied for and approved, thereby
preventing Saura to complete its payment of jute mill project.
The trial court ruled that RFC was guilty of breach of contract. Defendant
appealed to the lower court’s decision alleging that there was no perfected contract.

Issue: WON a contract was perfected?

Ruling: Yes. A consensual contract was perfected.

The court ruled that under Article 1954 of the civil code provides that an
accepted promise to deliver something by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until the delivery of the object of the contract.
In this case, an application for a loan of money was approved by resolution
of the defendant corporation and the corresponding mortgage was executed and
registered, hence, arises a perfected-consensual contract of loan.
BPIIC vs CA
Gr. No. 133632

Facts: Frank Roa obtained a loan from Ayala Investment and Development
Corporation (AIDC), the predecessor of BPI Investment Corporation (BPIIC), for
the construction of a house on his lot in New Alabang Village, Muntinlupa. Said
house and lot were mortgaged to AIDC to secure the loan. In 1980, Roa sold the
house and lot to private respondents ALS and Antonio Litonjua for P850,000.
AIDC, however, was not willing to extend the old interest rate and proposed to
grant them a new loan of P500,000 to be applied to Roa’s debt and secured by the
same property. The mortgage deed was executed in March 1981 stipulated that the
monthly amortization shall commence on May 31, 1981.
ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum of
P190,601.35. BPIIC then released to private respondents P7,146.87, purporting to
be what was left of their loan after full payment of Roa’s loan.
BPIIC instituted a foreclosure proceedings against private respondents on
the ground that they failed to pay the mortgage indebtedness amounted to
P475,585.31. A notice of sheriff’s sale was published.
ALS and Litonjua filed against BPIIC. They alleged that they were not in
arrears in their payment, but in fact made an overpayment. Maintained that they
should not be made to pay amortization before the actual release of the P500,000
loan in August and September 1982. Furthermore, they averred that out of the
P500,000 loan, only the total amount of P464,351.77 was released to private
respondents.
The trial court had held that private respondents were not in default in the
payment of their monthly amortization, hence, the extrajudicial foreclosure
conducted by BPIIC was premature and made in bad faith. Likewise, the court
dismissed the foreclosure suit for being premature.
CA affirmed the lower court’s decision. The court ruled that a simple loan is
perfected only upon the delivery of the object of the contract. The contract loan
between BPIIC and ALS & Litonjua was perfected only the date when BPIIC
released the purported balance of P500,000.00 loan after deducting the value of
Roa’s indebtedness.
Petitioner claims that a contract of loan is a consensual contract, and a loan
contract is perfected at the time the contract of mortgage is executed conformably
with the ruling in Bonnevie v. Court of Appeals.

Issue: WON a loan contract is not a consensual contract?

Ruling: Yes. A loan contract is not a consensual contract but a real contract. It is
perfected only upon the delivery of the object of the contract, Petitioner
misapplied the case of Bonnevie vs CA. The contract in Bonnevie declared by this
Court as a perfected consensual contract falls under the first clause of Article 1934,
Civil Code. It is an accepted promise to deliver something by way of simple loan.
 a perfected loan contract can give rise to an action for damages, said
contract does not constitute the real contract of loan which requires the delivery of
the object of the contract for its perfection and which gives rise to obligations only
on the part of the borrower.
Pantaleon vs American Express International Inc.
Gr. No. 174269

Facts: American Express International Inc., is a resident foreign corporation

engaged in the business of providing credit services, one of its card holder was
Pantaleon.
The family of Pantaleon, went on a guided European tour in Amsterdam.
The group began their sightseeing with a trip to the Coster Diamond House
(Coster). While at Coster, Mrs. Pantaleon decided to purchase some diamond
pieces. Pantaleon presented his American Express credit card to the sales clerk to
pay for this purchase, after swiping the card the clerk asked Pantaleon to sign the
charge slip, which was then electronically referred to AMEX’s Amsterdam office.
The Coster, still had not received approval from AMEX for the purchase so
Pantaleon asked the store clerk to cancel the sale. However, the store manager
convinced Pantaleon to wait a few more minutes. Subsequently, the store manager
informed Pantaleon that AMEX was asking for bank references; Pantaleon
responded by giving the names of his Philippine depository banks. After Pantaleon
presented his credit card, AMEX still had not approved the purchase. Coster then
decided to release the purchased items to Pantaleon even without AMEX’s
approval.
After the trip to Europe, the Pantaleon family proceeded to the United
States. Again, Pantaleon experienced delay in securing approval for purchases
using his American Express credit card, the first delay, was when he wanted to
purchase golf equipment; 2nd delay occurred when he wanted to purchase
children’s shoes.
Upon return to Manila, Pantaleon sent AMEX a letter demanding an apology
for the humiliation and inconvenience he and his family experienced due to the
delays in obtaining approval for his credit card purchases. AMEX responded by
explaining that the delay in Amsterdam was due to the amount involved.
Dissatisfied with its explanation, Pantaleon filed against the credit card company
with the Regional Trial Court of Makati City.
The trial court found AMEX guilty of delay, the Court of Appeals reversed
the decision and ruled that AMEX cannot be held liable for any form of damages,
since, there was no proof that AMEX breached its contract, or that it acted in a
wanton, fraudulent or malevolent manner.

Issue: WON AMEX committed a breach of its obligations to Pantaleon?

Ruling: No. From the loan agreement perspective, the contractual relationship
begins to exist only upon the meeting of the offer and acceptance of the parties
involved. In more concrete terms, when cardholders use their credit cards to pay
for their purchases, they merely offer to enter into loan agreements with the credit
card company. Only after the approval of the company, the purchase shall be
binding between the parties as loan contracts, in keeping with Article 1319 of the
Civil Code, which provides: “Article 1319. Consent is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.”
In this case, the card membership agreement itself, clearly states that AMEX
“reserve[s] the right to deny authorization for any requested Charge.” By so
providing, AMEX made its position clear that it has no obligation to approve any
and all charge requests made by its card holders.
Naguiat vs CA
Gr. no. 118375

Facts: Queaño applied with Naguiat for a loan in the amount of P200,000.00. To
secure the loan, Queaño executed a Deed of Real Estate Mortgage and even
surrendered to Naguiat the owner’s duplicates of the titles covering the mortgaged
properties, the deed was notarized. Thereafter, Queaño issued to Naguiat a
promissory note for the amount of P200,000.00, with interest at 12% per annum,
payable on 11 September 1980. Queaño also issued a Security Bank and Trust
Company check for the amount of P200,000.00 and payable to the order of
Naguiat.
Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. Queaño requested Security Bank to stop
payment of her postdated check, but the bank rejected the request pursuant to its
policy not to honor such requests if the check the drawn had insufficient funds.
Queaño then received a letter from Naguiat’s lawyer, demanding settlement of the
loan. 
Naguiat applied for the extrajudicial foreclosure of the mortgage with the
Sheriff of Rizal Province. Queaño filed the case with RTC of Pasig City, seeking
the annulment of the mortgage deed.
The trial court eventually stopped the auction sale. Further it ruled that,
the Deed of Real Estate Mortgage was null and void, and ordered Naguiat to return
to Queaño the owner’s duplicates of her titles to the mortgaged lots. The Court of
Appeals affirmed the lower court’s decision. Hence, the present petition.
Issue: WON the issuance of check resulted in the perfection of the loan contract?

Ruling: No. Naguiat did not submit any evidence that the checks she issued or
endorsed were actually encashed or deposited. The mere issuance of the checks did
not result in the perfection of the contract of loan. For the Civil Code provides that
the delivery of bills of exchange and mercantile documents such as checks shall
produce the effect of payment only when they have been cashed. It is only after the
checks have produced the effect of payment that the contract of loan may be
deemed perfected. Art. 1934 of the Civil Code provides:
“An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple loan itself
shall not be perfected until the delivery of the object of the contract.”
A loan contract is a real contract, not consensual, and, as such, is perfected
only upon the delivery of the object of the contract. In this case, the objects of the
contract are the loan proceeds which Queaño would enjoy only upon the
encashment of the checks signed or indorsed by Naguiat. If indeed the checks were
encashed or deposited, Naguiat would have certainly presented the corresponding
documentary evidence, such as the returned checks and the pertinent bank records.
Herrera vs Petrophil Corporation
Gr. No. L-48349

Facts: Francisco Herrera and ESSO Standard Eastern, Inc., entered into a "Lease
Agreement" whereby Herrera leased portion of his property for a period of 20
years. Pursuant to the said contract, the defendant paid to the plaintiff advance
rentals for the first eight years, subtracting therefrom the amount of P101,010.73,
the amount it computed as constituting the interest or discount for the first eight
years, in the total sum P180,288.47. Defendant explained that there had been a
mistake in computation, paid to the plaintiff the additional sum of P2,182.70,
thereby reducing the deducted amount to only P98,828.03.
Herrera sued the defendant for the sum of P98,828.03, with interest,
claiming this had been illegally deducted from him in violation of the Usury Law.
He also prayed for moral damages and attorney's fees. In its answer, the defendant
admitted the factual allegations of the complaint but argued that the amount
deducted was not usurious interest but a discount given to it for paying the rentals
in advance for eight years. Judgment on the pleadings was rendered for the
defendant. The case was elevated to this court for question of law was involved.

Issue: WON the contract within the parties was of loan?

Ruling: No. As its title plainly indicates, the contract between the parties is one of
lease and not of loan. It is clearly denominated a "LEASE AGREEMENT."
Nowhere in the contract is there any showing that the parties intended a loan rather
than a lease. The provision for the payment of rentals in advance cannot be
construed as a repayment of a loan because there was no grant or forbearance of
money as to constitute an indebtedness on the part of the lessor. On the contrary,
the defendant was discharging its obligation in advance by paying the eight years
rentals, and it was for this advance payment that it was getting a rebate or discount.
The provision for a discount is not unusual in lease contracts. As to its
validity, it is settled that the parties may establish such stipulations, clauses, terms
and condition as they may want to include; and as long as such agreements are not
contrary to law, morals, good customs, public policy or public order, they shall
have the force of law between them.
People vs Concepcion
Gr. No. L-19190

Facts: Venancio Concepcion, President of the Philippine National Bank, authorized

an extension of credit in favor of "Puno y Concepcion, S. en C.” in the amount of
P300,000. The authorization was essential to the memorandum order of
Concepcion in limiting the discretional power of the local manager at Aparri,
Cagayan, to grant loans and discount negotiable documents to P5,000, which, in
certain cases, could be increased to P10,000. Pursuant to this authorization, credit
aggregating P300,000, was granted the firm of "Puno y Concepcion, S. en C.," the
only security required consisting of six demand notes.
Section 35 of Act No. 2747, provides that the National Bank shall not,
directly or indirectly, grant loans to any of the members of the board of directors of
the bank nor to agents of the branch banks. Futhermore, its section 49 provides that
any person who shall violate any of the provisions of this Act shall be punished by
a fine not to exceed P10,000, or by imprisonment not to exceed 5 years, or by both
such fine and imprisonment. These two sections were the alleged unlawful acts of
Venancio Concepcion, hence, was charged in the Court of First Instance of
Cagayan and was sentenced to imprisonment for one year and six months.

Issue: Whether or not the granting of credit of P300,000 to the co-partnership by

Vicencio, a loan within the meaning of Section 35 of Act No. 2747?

Ruling: Yes. The "credit" of an individual means his ability to borrow money by
virtue of the confidence or trust reposed by a lender that he will pay what he may
promise. A "loan" means the delivery by one party and the receipt by the other
party of a given sum of money, upon an agreement, express or implied, to repay
the sum loaned, with or without interest. The concession of a "credit" necessarily
involves the granting of "loans" up to the limit of the amount fixed in the "credit."
De Los Santos vs Jarra
Gr. No. L-4150

Facts: Felix de los Santos brought alleged Magdaleno Jimenea borrowed and
obtained from the De Los Santos 10 first-class carabaos, to be used at the animal-
power mill of his hacienda, under the sole condition that they should be returned to
the owner as soon as the work at the mill was terminated, however, Jimenea did
not return the carabaos, notwithstanding the fact that the petitioner claimed their
return after the work at the mill was finished. Magdaleno Jimenea died and
Agustina Jarra was appointed by the Court of First Instance of Occidental Negros
as administratrix of Jimenea’s estate. Petitioner asked the commissioners of the
estate of Jimenea, for the return of the ten carabaos, but was rejected. Hence, De
Los Santos filed a suit aganst Jarra, prayed that judgment be entered against Jarra,
as administratrix of the estate of the deceased, ordering her to return the ten first-
class carabaos loaned to the late Jimenea.
The defendant answered to the complaint, that it is true that the late Jimenea
asked the petitioner to loan him ten carabaos, however, he only obtained three
second-class animals, which were afterwards transferred by sale of petitioner to the
said Jimenea.
The court rendered a decision sentencing Agustina Jarra, as administratrix of
the estate of Magdaleno Jimenea, to return to the plaintiff, Felix de los Santos, the
remaining six second and third class carabaos, or the value thereof at the rate of
P120 each, or a total of P720 with the costs.

Issue: WON contracts is one of commodatum?

Ruling: Yes. In a contract of commodatum whereby one of the parties thereto

delivers to the other a thing that is not perishable, to be used for a certain time and
afterwards returned, it is the imperative duty of the bailee, if he should be unable to
return the thing itself to the owner, to pay damages to the latter if, through the fault
of the bailee, the thing loaned was lost or destroyed, inasmuch as the bailor retains
the ownership thereof.
Garcia vs Thio
Gr. No. 154878

Facts: Rica Marie S. Thio received from petitioner Carolyn M. Garcia a crossed
check dated February 24, 1995 in the amount of US$100,000 payable to the order
of a certain Marilou Santiago. Thereafter, petitioner received from respondent for 4
months year 1995 the amount of US$3,000, While P76,500 for another 4 months.
Respondent received from petitioner another crossed check in the amount of
P500,000, also payable to the order of Marilou Santiago. Consequently, petitioner
received from respondent the amount of P20,000 for 4 months.
According to petitioner, respondent failed to pay the principal amounts of
the loans US$100,000 and P500,000 when they fell due. Thus, on February 22,
1996, petitioner filed a complaint for sum of money and damages in the RTC of
Makati City.
Petitioner alleged that Respondent paid the stipulated monthly interest for
both loans but on their maturity dates, she failed to pay the principal amounts
despite repeated demands.
RTC ruled in favor of petitioner. the CA reversed the decision of the RTC
and ruled that there was no contract of loan between the parties.

Issue: WON there was a perfected contract of loan?

Ruling: Yes. A loan is a real contract, not consensual, and as such is perfected only
upon the delivery of the object of the contract. This is evident in Art. 1934 of the
Civil Code which provides an accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but the commodatum or
simple loan itself shall not be perfected until the delivery of the object of the
contract.
in this case the money received by the debtor when the checks were
encashed, hence, debtor acquires ownership of such money and is bound to pay the
creditor an equal amount.
ACME SHOE vs CA
Gr. No. 103576

Facts: Chua Pac, in behalf of the company “Acme Shoe, Rubber & Plastic
Corporation,” executed a chattel mortgage in favor of Producers Bank of the
Philippines. The mortgage stood by way of security for petitioner’s corporate loan
of P3,000,000.00.
In due time, the loan of P3,000,000.00 was paid by petitioner corporation.
Subsequently, it obtained bank additional financial accommodations totalling
P2,700,000.00. These borrowings were on due date also fully paid. The bank, again
extended to the corporation a loan of P1,000,000.00 covered by four promissory
notes for P250,000.00 each.
Due to financial constraints, the loan was not settled at maturity. Respondent
bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage
with the Sheriff of Caloocan City.
The corporation filed an action before the Regional Trial Court of Caloocan
City.
The court dismissed the complaint and ordered the foreclosure of the chattel
mortgage. It held petitioner corporation bound by the stipulations of the chattel
mortgage. The CA affirmed the decision of the lower court.

Issue: WON it is valid and effective to have a clause in a chattel mortgage to

extend its coverage to obligations yet to be contracted or incurred?

Ruling: No. a chattel mortgage can only cover obligations existing at the time the
mortgage is constituted. Although a promise expressed in a chattel mortgage to
include debts that are yet to be contracted can be a binding commitment that can be
compelled upon, the security itself, however, does not come into existence or arise
until after a chattel mortgage agreement covering the newly contracted debt is
executed either by concluding a fresh chattel mortgage or by amending the old
contract conformably with the form prescribed by the Chattel Mortgage Law.
Bonnevie vs CA
Gr. No. L-49101

Facts: Spouses Jose and Josefa Lozano were the owners of the property which they
mortgaged to secure the payment of the loan in the principal amount of P75,000.00
they were about to obtain from Philippine Bank of Commerce; Which it executed a
Deed of Sale with Mortgage for and in consideration of the sum of P100,000.00,
P25,000.00 of which amount being payable to the Lozano spouses upon the
execution of the document, and the balance of P75,000.00 being payable to
defendant.
When the mortgage was executed by the Lozano spouses in favor of
defendant, the loan of P75,000.00 was not yet received by them, and when their
co-maker Alfonso Lim signed the promissory note for that amount; Lozano had
assigned all his rights under the Deed of Sale with Assumption of Mortgage to his
brother Raoul Bonnevie; Defendant applied for the foreclosure of the mortgage,
and notice of sale was published in the Luzon Weekly Courier; and the property
was sold to defendant for P84,387.00.
A complaint was filed by petitioner Honesto Bonnevie with the Court of
First Instance of Rizal against respondent Philippine Bank of Commerce praying
for the annulment of the Deed of Mortgage in favor of the Philippine Bank of
Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the
extrajudicial foreclosure made. Alleged that the property in question was
foreclosed pursuant to Act No. 3135 as amended, without, however, complying
with the condition imposed for a valid foreclosure.
Defendant bank denied the allegations in the complaint and raised that the
defendant has not given its consent, to the sale of the mortgaged property to
petitioner, even assumption by the petitioner’s loan.
Petitioner Raoul SV Bonnevie filed a motion for intervention. Which was
premised on the Deed of Assignment, covering the rights and interests of petitioner
over the subject property.
The trial court rendered a decision dismissing the complaint. CA affirmed
the decision of the lower court.

Issue: WON the real estate mortgage executed by spouses Lozano in favor of
respondent bank was validly and legally executed?

Ruling: Yes. it is clearly seen that the mortgage deed was executed for and on
condition of the loan granted to the Lozano spouses. The fact that the latter did not
collect from the respondent Bank the consideration of the mortgage on the date it
was executed is immaterial. A contract of loan being a consensual contract, the
herein contract of loan was perfected at the same time the contract of mortgage
was executed. The promissory note executed on December 12, 1966 is only an
evidence of indebtedness and does not indicate lack of consideration of the
mortgage at the time of its execution.
Navoa vs CA
Gr. No. 59255

Facts: Several loans where given by Teresita to Olivia which were all secured by a
Philippine Commercial and Industrial Bank Check, where in all of them when it
was deposited was dishonored.
Teresita filed with the Regional Trial Court of Manila an action against
Olivia for collection of various sums of money based on loans obtained. Petitioners
filed a motion to dismiss the complaint on the ground that the complaint stated no
cause of action and that plaintiffs had no capacity to sue.
After private respondents submitted their opposition to the motion to dismiss,
however, the trial court dismissed the case.
Court of Appeals modified the order of dismissal and remanding the case to
the trial court.
Petitioners submit that private respondents failed to specify in their
complaint a fixed period within which petitioners should pay their obligations; that
instead of stating that petitioners failed to discharge their obligations upon maturity
private respondents sought to collect on the checks which were issued to them
merely as security for the loans; and, that private respondents failed to make a
formal demand on petitioners to satisfy their obligations before filing the action.

Issue: WON Olivia incurred in delay?

Ruling: Yes. those obliged to deliver or to do something incur in delay from the
time the obligee judicially or extrajudicially demands from them the fulfillment of
their obligation.
Petitioners failed to make good the checks on their due dates for the payment
of their obligations. Hence, private respondents filed the action with the trial court
precisely to compel petitioners to pay their due and demandable obligations. Art.
1169 of the Civil Code is explicit—those obliged to deliver or to do something
incur in delay from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation. The continuing refusal of petitioners to
heed the demand of private respondents stated in their complaint unmistakably
shows the existence of a cause of action on the part of the latter against the former.
Central Bank of the Philippines vs CA
Gr. No. L-45710

Facts: Island Savings Bank approved the loan application for P80,000.00 of
Sulpicio M. Tolentino, as a security for the loan executed a real estate mortgage
over his 100-hectare land located in Cubo, Las Nieves, Agusan (TCT No. T-305).
The bank required that Sulpicio M. Tolentino shall use the loan proceeds solely as
an additional capital to develop his other property into a subdivision.
P17,000.00 was the partial release of the loan was made by the Bank; and
Sulpicio M. Tolentino and his wife Edita Tolentino signed a promissory note for
P17,000.00. An advance interest for the P80,000.00 loan covering a 6-month
period amounting to P4,800.00 was deducted from the partial release of
P17,000.00. But this pre-deducted interest was refunded to Sulpicio M. Tolentino,
after being informed by the Bank that there was no fund yet available for the
release of the P63,000.00 balance. The Bank, thru its vicepresident and treasurer,
promised repeatedly the release of the P63,000.00 balance.
Monetary Board, after finding that Island Savings Bank failed to put up the
required capital to restore its solvency, issued Resolution No. 967 which prohibited
Island Savings Bank from doing business in the Philippines and instructed the
Acting Superintendent of Banks to take charge of the assets of Island Savings
Bank.
The Bank in view of nonpayment of the P 17,000.00 covered by the
promissory note, filed an application for the extra-judicial foreclosure of the real
estate mortgage of Tolentino.
Tolentino filed a petition with the Court of First Instance of Agusan against
the Bank, alleging that since the Bank failed to deliver the P63,000.00 balance of
the P80,000.00 loan. he is entitled to specific performance by ordering Island
Savings Bank to deliver the P63,000.00 with interest of 12% per annum, and if said
balance cannot be delivered, to rescind the real estate mortgage.
The trial court ruled in favor of the bank and ordered tolentino to pay the
amount of P17,000.00 to the said bank. The CA modified the decision of the lower
court by affirming the dismissal of tolentino and that the bank may neither
foreclose the real estate mortgage nor collect the P17,000.00.

Issue: Whether the action of Sulpicio for specific performance prosper?

Ruling: No. Since Island Savings Bank was in default in fulfilling its reciprocal
obligation under their loan agreement, Tolentino under Article 1191 of the Civil
Code, may choose between specific performance or rescission with damages in
either case. But since Island Savings Bank is now prohibited from doing further
business by Monetary Board Resolution, WE cannot grant specific performance in
favor of Tolentino. When Island Savings Bank and Tolentino entered into an
P80,000.00 loan agreement, they undertook reciprocal obligations.
In reciprocal obligations, the obligation or promise of each party is the
consideration for that of the other; and when one party has performed or is ready
and willing to perform his part of the contract, the other party who has not
performed or is not ready and willing to perform incurs in delay (Art. 1169 of the
Civil Code).
The promise of Sulpicio M. Tolentino to pay was the consideration for the
obligation of Island Savings Bank to furnish the P80,000.00 loan. When Sulpicio
executed a real estate mortgage, he signified his willingness to pay the P80,000.00
loan. From such date, the obligation of Island Savings Bank to furnish the
P80,000.00 loan accrued. Thus, the Bank's delay in furnishing the entire loan
started when Sulpicio executed a real estate mortgage, and lasted for a period of 3
years or when the Monetary Board of the Central Bank issued Resolution, which
prohibited Island Savings Bank from doing further business. Such prohibition
cannot interrupt the default of Island Savings Bank in complying with its
obligation of releasing the P63,000.00 balance because said resolution merely
prohibited the Bank from making new loans and investments, and nowhere did it
prohibit island Savings Bank from releasing the balance of loan agreements
previously contracted.
Quintos vs Beck
Gr. No. L-46240

Facts:
Beck, as a tenant of herein petitioner, occupied petitioner’s house on M. H.
del Pilar street, No. 1175. Upon the novation of the contract of lease between the
plaintiff and defendant, the Quintos gratuitously granted to the Ansaldo the use of
the furniture, in the condition that Ansaldo would return them to the petitioner
upon its demand.
Subsequently, Petitioner sold the property to Maria Lopez and Rosario
Lopez and, these three notified Ansaldo of the conveyance, giving him 60 days to
vacate the premises. Thereafter, the petitioner required Ansaldo to return all the
furniture transferred to him. The defendant, through another person, wrote to the
petitioner reiterating that she may call for the furniture in the ground floor of the
house. Same month, the defendant wrote another letter to the plaintiff informing
her that he could not give up the three gas heaters and the four electric lamps
because he would use them until the lease is due to expire.
Petitioner refused to get the furniture, the fact that the defendant had
declined to make delivery of all of them. Before vacating the house, the defendant
deposited with the Sheriff all the furniture belonging to the petitioner and are now
on deposit in the warehouse situated at No. 1521, Rizal Avenue, in the custody of
the said sheriff.
Petitioner brought an action against the defendant to return her certain
furniture which she lent him for his use.
The Court of First Instance of Manila ordered the defendant to return to
Quintos the three has heaters and the four electric lamps found in the possession of
the Sheriff of said city.

Issue: WON the contract between the parties was a contract of commodatum?

Rlung: Yes. The contract entered into between the parties is one of commadatum,
because under it the petitioner gratuitously granted the use of the furniture to the
defendant, reserving for herself the ownership thereof; by this contract the
defendant bound himself to return the furniture to the plaintiff, upon the latters
demand. The obligation voluntarily assumed by the defendant to return the
furniture upon the plaintiff's demand, means that he should return all of them to the
plaintiff at its residence or house. The defendant did not comply with this
obligation when he merely placed them at the disposal of the petitioner, retaining
for his benefit the three gas heaters and the four eletric lamps. The provisions of
article 1169 of the Civil Code cited by counsel for the parties are not squarely
applicable. The trial court, therefore, erred when it came to the legal conclusion
that the petitioner failed to comply with her obligation to get the furniture when
they were offered to her.

(articles 1740, paragraph 1, and 1741 of the Civil Code)

Producer’s Bank of the Philippines vs CA
Gr. No. 115324

Facts:

Private respondent Franklin Vives was asked by Angeles Sanchez to help,

Col. Arturo Doronilla, in incorporating his business, the Sterela Marketing and
Services. Sanchez asked private respondent to deposit in a bank a certain amount
of money in the Sterela’s bank account for purposes of its incorporation. Assuring
the private respondent that he could withdraw his money from said account within
a month’s time. Private respondent asked Sanchez to bring Doronilla to their house
so that they could discuss Sanchez’s request.

Private Resondent, Sanchez, Doronilla and a certain Estrella Dumagpi,

Doronilla’s private secretary, met and discussed the matter. Thereafter, relying on
the assurances and representations of Sanchez and Doronilla, private respondent
issued a check in the amount of ₱200,000.00 in favor of Sterela. Private respondent
instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in
opening a savings account in the name of Sterela in the Buendia, Makati branch of
Producers Bank of the Philippines.

However, only Sanchez, Mrs. Vives and Dumagpi went to the bank to
deposit the check. They had with them an authorization letter from Doronilla
authorizing Sanchez and her companions, "in coordination with Mr. Rufo
Atienza," to open an account for Sterela Marketing Services in the amount of
₱200,000.00. In opening the account, the authorized signatories were Inocencia
Vives and/or Angeles Sanchez. A passbook for Savings Account No. 10-1567 was
thereafter issued to Mrs. Vives.

Subsequently, private respondent learned that Sterela was no longer holding

office in the address previously given to him. Alarmed, he and his wife went to the
Bank to verify if their money was still intact. Mr. Rufo Atienza, informed them
that part of the money in its Savings Account No. 10-1567 had been withdrawn by
Doronilla, and that only ₱90,000.00 remained therein. He likewise told them that
Mrs. Vives could not withdraw said remaining amount because it had to answer for
some postdated checks issued by Doronilla.

According to Atienza, after Mrs. Vives and Sanchez opened a Savings

Account No. 10-1567, Doronilla opened a Current Account No. 10-0320 for
Sterela and authorized the Bank to debit the Savings Account No. 10-1567 for the
amounts necessary to cover overdrawings in its Current Account No. 10-0320.

Upon opening the current account, Sterela, through Doronilla, obtained a

loan of ₱175,000.00 from the Bank. To cover payment thereof, Doronilla issued
three postdated checks, all of which were dishonored. Atienza also said that
Doronilla could assign or withdraw the money in the Savings Account No. 10-
1567 being the sole proprietor of Sterela.

Private respondent received a letter from Doronilla, assuring him that his
money was intact and would be returned to him. Doronilla issued a postdated
check for (₱212,000.00) in favor of private respondent. However, upon
presentment thereof by private respondent to the drawee bank, the check was
dishonored. Doronilla requested private respondent to present again the same
check, but it was again dishonored.

Private respondent referred the matter to a lawyer, who made a written

demand upon Doronilla for the return of his client’s money. Doronilla issued
another check for ₱212,000.00 in private respondent’s favor but the check was
again dishonored for insufficiency of funds.

Private respondent filed a petition with the RTC in Pasig, Metro Manila
against Doronilla, Sanchez, Dumagpi and petitioner for recovery of sum of money.
The trial court ruled in favor of the Private Respondent.

Petitioner appealed the trial court’s decision to the Court of Appeals.

However, the appellate court affirmed in toto the decision of the RTC and likewise
denied with finality petitioner’s motion for reconsideration.

Issue: WON the CA erred in holding that the transaction between Defendant
Doronilla and Private Respondent Vives was one of simple loan?

Ruling: No. No error was committed by the Court of Appeals when it ruled that the
transaction between private respondent and Doronilla was a commodatum and not
a mutuum. A circumspect examination of the records reveals that the transaction
between them was a commodatum. Article 1933 of the Civil Code distinguishes
between the two kinds of loans provides that:

By the contract of loan, one of the parties delivers to another, either

something not consumable so that the latter may use the same for a certain time
and return it, in which case the contract is called a commodatum; or money or
other consumable thing, upon the condition that the same amount of the same kind
and quality shall be paid, in which case the contract is simply called a loan or
mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

In commodatum, the bailor retains the ownership of the thing loaned, while in
simple loan, ownership passes to the borrower.

The foregoing provision seems to imply that if the subject of the contract is a
consumable thing, such as money, the contract would be a mutuum. However,
there are some instances where a commodatum may have for its object a
consumable thing. Under Article 1936 of the Civil Code provides:

Consumable goods may be the subject of commodatum if the purpose of the

contract is not the consumption of the object, as when it is merely for exhibition.

Thus, if consumable goods are loaned only for purposes of exhibition, or when the
intention of the parties is to lend consumable goods and to have the very same
goods returned at the end of the period agreed upon, the loan is a commodatum and
not a mutuum.

The rule is that the intention of the parties thereto shall be accorded primordial
consideration in determining the actual character of a contract. In case of doubt, the
contemporaneous and subsequent acts of the parties shall be considered in such
determination.

Under Article 2180 of the Civil Code, employers shall be held primarily and
solidarily liable for damages caused by their employees acting within the scope of
their assigned tasks. To hold the employer liable under this provision, it must be
shown that an employer-employee relationship exists, and that the employee was
acting within the scope of his assigned task when the act complained of was
committed. Case law in the United States of America has it that a corporation that
entrusts a general duty to its employee is responsible to the injured party for
damages flowing from the employee’s wrongful act done in the course of his
general authority, even though in doing such act, the employee may have failed in
its duty to the employer and disobeyed the latter’s instructions.
Republic vs Bagtas
Gr. No. L-17474

Facts:
Jose V. Bagtas borrowed from the Republic of the Philippines through the
Bureau of Animal Industry three bulls: a Red Sindhi with a book value of
P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1
year, from May 8, 1948 to May 7, 1949, for breeding purposes subject to a
government charge of breeding fee of 10% of the book value of the bulls.
Upon the expiration of the contract, the borrower asked for a renewal for
another period of 1 year from May 8 1949 to May 7 1950. However, the Secretary
of Agriculture and Natural Resources approved a renewal thereof of only 1 bull for
another year and requested the return of the other two.

Bagtas wrote to the Director of Animal Industry that he would pay the value
of the three bulls. In the letter he reiterated his desire to buy them at a value with a
deduction of yearly depreciation to be approved by the Auditor General. Director
of Animal Industry advised him that the book value of the three bulls could not be
reduced and that they either be returned or their book value paid not later than 31
October 1950. Bagtas failed to pay the book value of the three bulls or to return
them.

Hence, Court of First Instance of Manila commenced an action against

Bagtas praying that he be ordered to return the three bulls loaned to him or to pay
their book value in the total sum of P3,241.45 and the unpaid breeding fee in the
sum of P199.62, both with interests, and costs.

The trial court render a decision sentencing the defendant bagtas to pay the
sum of P3,625.09 the total value of the three bulls plus the breeding fees in the
amount of P626.17 with interest on both sums of (at) the legal rate from the filing
of this complaint and costs.

Felicidad M. Bagtas, the surviving spouse of the defendant filed a motion

alleging that the two bull Sindhi and Bhagnari were returned to the Bureau Animal
of Industry and that sometime in November 1958 while the third bull, the
Sahiniwal, died from gunshot wound inflicted during a Huk raid on Hacienda
Felicidad Intal, and praying that the writ of execution be quashed and that a writ of
preliminary injunction be issued.
 The Court denied her motion. Hence, this appeal certified by the Court of
Appeals to this Court because a question of law are raised.

Issue: WON there was a contract was a Commodatum ?

Ruling: No.  A contract of commodatum is essentially gratuitous. If the breeding

fee be considered a compensation, then the contract would be a lease of the bull.

Under article 1671 of the Civil Code the lessee would be subject to the
responsibilities of a possessor in bad faith, because she had continued possession
of the bull after the expiry of the contract. And even if the contract
be commodatum, still the appellant is liable, because article 1942 of the Civil Code
provides that a bailee in a contract of commodatum is liable for loss of the things,
even if it should be through a fortuitous event:

(2) If he keeps it longer than the period stipulated . . .

(3) If the thing loaned has been delivered with appraisal of its value, unless
there is a stipulation exempting the bailee from responsibility in case of a
fortuitous event;

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of
one bull was renewed for another period of one year to end on 8 May 1950. But the
appellant kept and used the bull until November 1953 when during a Huk raid it
was killed by stray bullets. Furthermore, when lent and delivered to the deceased
husband of the appellant the bulls had each an appraised book value, to with: the
Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It
was not stipulated that in case of loss of the bull due to fortuitous event the late
husband of the appellant would be exempt from liability.

WON Bagtas should be held liable for its loss due to force majeure.

2.     YES, he is liable for the loss.

Ratio: A contract of commodatum is essentially gratuitous. Supreme Court held

that Bagtas was liable for the loss of the bull even though it was caused by a
fortuitous event. If the contract was one of lease, then the 10% breeding charge is
compensation (rent) for the use of the bull and Bagtas, as lessee, is subject to the
responsibilities of a possessor. He is also in bad faith because he continued to
possess the bull even though the term of the contract has already expired.
Mina vs Pascual

Gr. No. L-8321

Facts:

Francisco Fontanilla acquired during his lifetime, a lot in the center of the
town of Laoag, Ilocos Norte, the property having been awarded to him through its
purchase at a public auction held by the alcalde mayor of that province.

Andres Fontanilla, with the consent of his brother Francisco, erected a

warehouse on a part of the said lot.

Due to the death of Francisco, the herein petitioner, Alejandro Mina, was
recognized as his heirs. On the other hand, the death of Andres, recognized herein
defendant Ruperta Pascual as the guardian of the minor Children of Andres,
became entitled to the said building.

Ruperta petitioned with the Court of First Instance of Ilocos Norte for
authorization to sell the warehouse, together with its lot. The plaintiffs opposed the
petition of Ruperta since it included the lot occupied by the warehouse, which they
claimed was their exclusive property, further, they requested the court, through
motion, to decide the question of the ownership of the lot before it pass upon the
petition for the sale of the warehouse.

The trial court ruled that the lot belonged to the owner of the warehouse
which had been built thereon thirty years before. Hence, the court orders the sale at
public auction of the said warehouse and of the lot on which it is built, with the
present boundaries of the land and condition of the building, at a price of not less
than P2,890 Philippine currency, thereafter, the building and lot was sold to Cu
Joco.

The plaintiffs appealed and this court reversed the judgment of the lower
court and held that the appellants were the owners of the lot in question.

The judgment became final and executory, a writ of execution issued and the
plaintiffs were given possession of the lot; thereafter the trial court annulled this
possession for the reason that it affected Cu Joco, who had not been a party to the
suit in which that writ was served.
Issue: WON the contract between Francisco and Andres is in the nature of
commodatum?

Ruling: No. It is an essential feature of the commodatum that the use of the thing
belonging to another shall be for a certain period. Francisco Fontanilla did not fix
any definite period or time during which Andres Fontanilla could have the use of
the lot whereon the latter was to erect a stone warehouse of considerable value, and
so it is that for the past thirty years of the lot has been used by both Andres and his
successors in interest.
The present contention of the plaintiffs that Cu Joco, now in possession of
the lot, should pay rent for it at the rate of P5 a month, would destroy the theory of
the commodatum sustained by them, since, according to the second paragraph of
the article 1740, "commodatum is essentially gratuitous," and, if what the plaintiffs
themselves aver that it never entered Francisco's mind to limit the period during
which his brother Andres was to have the use of the lot, because he expected that
the warehouse would eventually fall into the hands of his son, Fructuoso
Fontanilla, called the adopted son of Andres, which did not come to pass for the
reason that Fructuoso died before his uncle Andres. With that expectation in view,
it appears more likely that Francisco intended to allow his brother Andres a surface
right; but this right supposes the payment of an annual rent, and Andres had the
gratuitous use of the lot.
Pajuyo vs CA
Gr. No. 146364

Facts:

Colito T. Pajuyo paid ₱400 to a certain Pedro Perez for the rights over a
250-square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a
house made of light materials on the lot. Pajuyo and his family lived in the house
for 6 years.

Pajuyo and private respondent Eddie Guevarra executed a Kasunduan or

agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house
for free provided Guevarra would maintain the cleanliness and orderliness of the
house. Guevarra promised that he would voluntarily vacate the premises on
Pajuyo’s demand.

Pajuyo informed Guevarra of his need of the house and demanded that
Guevarra vacate the house. Guevarra refused.

Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial
Court of Quezon City.

Guevarra contended that Pajuyo had no valid title or right of possession over
the lot where the house stands because the lot is within the 150 hectares set aside
by Proclamation No. 137 for socialized housing. Guevarra pointed out that Pajuyo
did not show up or communicate with him. Guevarra insisted that neither he nor
Pajuyo has valid title to the lot.

The MTC ruled that the subject of the agreement between Pajuyo and
Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he
allowed Guevarra to use the house only by tolerance. Thus, Guevarra’s refusal to
vacate the house on Pajuyo’s demand made Guevarra’s continued possession of the
house illegal.

The RTC upheld the Kasunduan, which established the landlord and tenant
relationship between Pajuyo and Guevarra. The terms of the Kasunduan bound
Guevarra to return possession of the house on demand.

The Court of Appeals reversed the MTC and RTC rulings, which held that
the Kasunduan between Pajuyo and Guevarra created a legal tie akin to that of a
landlord and tenant relationship. The Court of Appeals ruled that the Kasunduan is
not a lease contract but a commodatum because the agreement is not for a price
certain.

Issue:  WON the contract between Pajuyo and Guevara was of a commodatum?

Ruling: No. In a contract of commodatum, one of the parties delivers to another

something not consumable so that the latter may use the same for a certain time
and return it. An essential feature of commodatum is that it is gratuitous. Another
feature of commodatum is that the use of the thing belonging to another is for a
certain period.64 Thus, the bailor cannot demand the return of the thing loaned until
after expiration of the period stipulated, or after accomplishment of the use for
which the commodatum is constituted. If the bailor should have urgent need of the
thing, he may demand its return for temporary use. If the use of the thing is merely
tolerated by the bailor, he can demand the return of the thing at will, in which case
the contractual relation is called a precarium. Under the Civil Code, precarium is a
kind of commodatum.

The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra

was not essentially gratuitous. While the Kasunduan did not require Guevarra to
pay rent, it obligated him to maintain the property in good condition. The
imposition of this obligation makes the Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are also different from that of
a commodatum.

Even assuming that the relationship between Pajuyo and Guevarra is one
of commodatum, Guevarra as bailee would still have the duty to turn over
possession of the property to Pajuyo, the bailor. The obligation to deliver or to
return the thing received attaches to contracts for safekeeping, or contracts of
commission, administration and commodatum. These contracts certainly involve
the obligation to deliver or return the thing received.